U.S. SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                           FORM 10-KSB

[x] Annual Report under Section 13 of 15 (d) of the Securities Exchange 
    Act of 1934 for the fiscal year ended December 31, 1997

[ ]Transition report under Section 13 or 15 (d) of the Securities
   Exchange Act of 1934 for the transition period from 
   ____________ to ___________

Commission File No. 0-18271
                           MAGELLAN TECHNOLOGY, INC.
                (Name of small business issuer in its charter)

               Utah                                      87-0493698
    (State or other jurisdiction                      (I.R.S. Employer
   of incorporation or organization)                 Identification No.)

          13526 South 110 West
              Draper, Utah                                  84020
   (Address of principal executive office)                (Zip Code)

    Issuer's telephone number, including area code:  (801) 495-2211

           Securities registered under Section 12(b) of the Act:
                                    None
                                
           Securities registered under Section 12(g) of the Act:
                              Common Stock
                       Par Value $.0002 per Share
                        ------------------------- 
                            (Title of Class)
                                
    Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months 
(or for such shorter period that the issuer was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days. 
Yes _X_  No___

    Check if there is no disclosure of delinquent fliers in response to Item 
405 of Regulation S-B in this form, and no disclosure will be contained, to 
the best of issuer's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this form 10-KSB or any amendment to 
this form 10-KSB.  [  ]

    The issuer's revenues for its most recent fiscal year totaled $319,611.

    The aggregate market value of the voting stock held by non-affiliates 
computed by reference to the price at which the stock was sold, or the average 
bid and asked prices of such stock, as of March 31, 1998 was $14,585,250

    As of March 31, 1998 15,557,600 shares of the issuer's stock
were issued and outstanding.

   Transitional Small Business Disclosure Format (Check one):
                        Yes____   No _X_
<PAGE>                        
                        
                              TABLE OF CONTENTS

PART I

     Item 1.   Description of Business  . . . . . . . . . . . . . . . . . .   1

     Item 2.   Description of Property  . . . . . . . . . . . . . . . . . .   6

     Item 3.   Legal Proceedings    . . . . . . . . . . . . . . . . . . . .   7

     Item 4.   Submission of Matters to a Vote of Security Holders . . . .    7

PART II

     Item 5.   Market  for  Common  Equity  and  Related Stockholder Matters  8

     Item 6.   Management's Discussion and Analysis or Plan of Operation      9

     Item 7.   Financial Statements . . . . . . . . . . . . . . . . . . . .  12

     Item 8.   Changes in and Disagreements with Accountants on 
               Accounting and Financial Disclosure  . . . . . . . . . . . .  12

PART III

     Item 9.   Directors, Executive Officers, Promoters and Control 
               Persons; Compliance with Section 16a of the Exchange Act      12

     Item 10.  Executive Compensation  . . . . . . . . . . . . . . . . . .   17

     Item 11.  Security  Ownership of Certain  Beneficial Owners and
               Management  . . . . . . . . . . . . . . . . . . . . . . . .   18

     Item 12.  Certain   Relationships   and   Related Transactions  . . .   20

PART IV

     Item 13.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .  22

SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
                             
<PAGE>                             

                                    PART I

ITEM 1.      DESCRIPTION OF BUSINESS

Business Development

      Magellan  Technology,  Inc. (the "Company" or "Magellan")  was
incorporated  under the laws of the State of  Utah  on  June  16,
1989.   Its  founders organized the Company for  the  purpose  of
raising capital and seeking profitable business opportunities.

      In February 1992, the Company completed the acquisition  of
Satellite Image Systems, Inc. ("SIS"), a Utah corporation engaged
in  providing image-based data entry services utilizing  licensed
and  proprietary  data  entry and communications  software.   The
acquisition  was accomplished by merging SIS with  and  into  the
Company's wholly-owned subsidiary, SIS International, Inc.,  with
SIS  being  the surviving corporation.  Through the  merger,  SIS
became a wholly-owned subsidiary of the Company.  In August 1996,
the  Company  announced the formation of  a  joint  venture  with
United  Insurance  Companies, Inc. ("UICI") of Dallas,  Texas  to
expand UICI's presence in the medical claims processing business.
SIS  contributed its technology, operations and management  to  a
newly-formed entity, SIS, LLC.  UICI contributed $3 million in cash and a 
$2 million  line of  credit  for  working  capital. The Company retained a 44%
interest  in SIS, LLC.  Darwin D.  Millet, formerly President of SIS, became 
the Chief Executive Officer of the newly-formed limited liability company.  
UICI is a financial company with interest in life and health insurance and
related  services, including the administration and  delivery  of
managed health care programs to selected markets.

      In  October 1996, the Company completed the acquisition  of
SkyHook  Technologies,  Inc., a Utah  corporation  ("SkyHook"  or
"STI")  organized  in  1995  and  engaged  in  development  of  a
proprietary,  cargo-management system for use  with  helicopters.
SkyHook's  initial  cargo-management  product  is  the   "SkyHook
External  Cargo Management System or ECMS" which is  a  computer-
controlled, multiple-hook cargo carrying device which attaches to
a   long  line  beneath  the  helicopter.   The  acquisition  was
accomplished  through  the  exchange of  approximately  4,874,936
shares  of  Magellan Common Stock in exchange for all issued  and
outstanding shares of SkyHook Common Stock and SkyHook  became  a
wholly-owned subsidiary of the Company.

      In  April  1997,  the  Company organized  Magellan  Service
Company  ("MSC")  as  a  wholly owned subsidiary to pursue avionics
integration  contract opportunities that can utilize  the experience and 
skills of the personnel presently employed by SkyHook.

                                  1
<PAGE>
      In  October 1997, the Company completed the acquisition  of
BioSource Inc.("BioSoure"), a Utah S corporation organized in 1983 and engaged 
in the development and sales of the "LISTEN" biofeedback information
system which is marketed and sold to healthcare practitioners  in
the  alternative  healthcare marketplace.   The  acquisition  was
ultimately accomplished through the exchange of $190,000 in cash and 225,000
shares  of  Magellan Common Stock in exchange for all issued  and
outstanding   shares  of  BioSource  Common  Stock.   BioMeridian
International, Inc. ("BioMeridian" or "BII") was  formed  as  the
surviving entity.

Business of the Company

     SIS, LLC.

           Products.  SIS, LLC has developed proprietary  systems
           --------
and  processes to provide document processing services for  large
national  and  regional  U.S. firms.   SIS,  LLC  specializes  in
healthcare  claims document processing which it performs  at  its
various facilities in Castle Dale, Ephraim, and Price, Utah, Dallas,  Texas
and in Jamaica.  The work is performed using high-speed scanners,
digital  modems,  satellite communications, proprietary  software
and OCR technology.

           Markets.  SIS, LLC has focused primarily on the health
           -------
claims  processing  industry.  This market is  on  the  verge  of
dynamic  change from traditional paper claim processes which  are
labor   intensive,  to  automated  electronic  claims  processing
systems.   To  process claims electronically  requires  that  the
payer  receive electronic claim submissions.  Due to many issues,
including  a lack of uniformity in healthcare claims,  a  natural
distrust  between providers and insurance claim payers, and  cost
of  automation,  most claims are still presented for  payment  on
paper.   SIS,  LLC  functions as an enabler  for  electronic
claims  processing.  By converting paper claims  into  electronic
claims,  at  a  price much lower than the payer's  cost,  SIS,LLC
provides payers with electronic claims ready for automatic claims
processing.

           Competition.   SIS, LLC believes that competition  for
           -----------
image-based   entry  services  comes  from  four  main   sources:
existing  domestic and overseas data entry service  bureaus,  in-
house   data  entry  operations,  optical  character  recognition
technology, and electronic capture of data.

           Marketing and Distribution. SIS, LLC's primary marketing
           --------------------------
efforts  focus  upon  companies located  in  the  United  States.
Services   are  marketed  directly  and  targeted  to   insurance
companies.   The  marketing  efforts  include  direct   mailings,
followed  by  on-site  demonstrations and  custom  proposals  for
individual clients.
                                  2
<PAGE>
           Government  Regulation.  SIS, LLC's primary business  is
           ----------------------
data entry and, as a result, no specialized licenses are required
in  either  the United States or Jamaica.  However,  because  SIS
utilizes   high  speed  satellite  communications  for   document
transmission,  specific  licenses and restrictions are required within
selected foreign jurisdictions.

           Employees.  SIS, LLC employs approximately 379 persons:
           ---------
47  in  Salt  Lake City, Utah,  59 in Castle Dale,  Utah,  85  in
Price, Utah, 38 in Ephraim, Utah, 20 in Dallas, Texas, and 130 in
Montego Bay, Jamaica.  Of the total number of employees, 24 are in 
administration, 3 are executives, and 352 are in operations.

     SkyHook.

           Products.   Since formation in February 1995,  SkyHook
           ---------
has been engaged in the development of computer-controlled multi-
hook  cargo transport devices which SkyHook believes will improve
the  safety  of  helicopter missions by  enabling  the  selective
delivery  and  retrieval of multiple external payloads  during  a
single  mission.  SkyHook also believes  that its 
devices  will  allow  an  air  crew  to  more  fully  utilize   a
helicopter's load capacity while minimizing flight time.

           The load-bearing components of the SkyHook devices are
constructed of high-quality machined components.  The air frame for
the  heavy  lift  device is capable of lifting 27,000  pounds  of
cargo  in  a three hook configuration or 36,000 pounds in  a  six
hook   configuration.   SkyHook  has  also  developed  a  lighter
collapsible  airframe  in  a  three or  four  hook  configuration
capable   of   lifting   12,000  pounds.    These   devices   are
aerodynamically  designed  for stable flight,  loaded  or  empty.
Product  features include aggregate and individual  hook  payload
weight  readouts,  various fault condition  warnings  and  safety
warnings and  load  release commands allowing the  drop  of  one  or
multiple  loads  simultaneously.  Navigation, identification  and
other  lighting systems are controlled by the operator.  The products
have  been  included in various tests with independent  labs  and
potential customers.

          Markets.  The market for the SkyHook device consists of
          -------
utility helicopters worldwide with a cargo lift capacity ranging from 3,000 
pounds to 36,000 pounds. Approximately 60% of utility helicopters are operated  
by government entities, with the military being the principal operator. The  
United States military is the largest single owner of utility helicopters, with
the U.S. Army owning more than any other entity, domestically  or
internationally.   Design  changes to the  device  have  resulted
principally  from testing conducted with the U.S. military.   SkyHook
expects to market its products directly  in  the  United
States (principally to the U.S. military) and through independent
representatives in international markets.  No devices  have  been
sold  to date and, notwithstanding favorable test results,  there
is  no  assurance  that  marketing  of  these  products  will  be
successful.
                                 3
<PAGE>           

           Competition.   SkyHook is aware of one  multi-hook
           -----------   
cargo  transport device which is offered in four  and  nine  hook
configurations and is a commercial-grade product offering with an
electronically-activated  selective load  release.   SkyHook
believes,  however,  that  its products  have  been  designed  to
address  significantly different markets requiring  much  greater
cargo  capacities  with  an emphasis on military  and  industrial
applications.

           Manufacturing.  SkyHook entered into a  contract  with
           -------------
AEL-Tracor located in Lansdale, Pennsylvania, a Tracor  Aerospace
company ("Tracor") for manufacture of the first 26 units  of  the
SkyHook device.  In late 1997 SkyHook concluded the manufacturing
contract  arrangement  with  Tracor.   Subsequent  to  year  end,
SkyHook  opened  a  facility  to  manufacture  and  assemble  the
products.

           Intellectual  Property.   On  January  14,  1997, SkyHook
           ----------------------
  received notice of allowance of a United  States  patent
which  relates  to the SkyHook device and has filed  applications
related to additional features of the products.  There can be  no
assurance  given that any additional patents will  be  issued  or
that the scope of any patent obtained will exclude competitors or
that  any of SkyHook's rights under the patent will  be  held
valid  if  subsequently challenged.  The validity and breadth  of
claims  covered  in  patents involve complex  legal  and  factual
questions  and, therefore, may be highly uncertain.   Whether  or
not  the  SkyHook's additional patent applications  are  granted,
others  may receive patents which contain claims having  a  scope
broad  enough  to cover products developed by SkyHook.   SkyHook
 has also developed proprietary software utilized  in  its
cargo  management system and has filed an application to register
the "SkyHook" logo as a United States trademark.

           Government  Regulation.  In addition to  military  air
           ---------------------- 
worthiness  requirements, the SkyHook products  are  required  to
comply  with  the  Federal  Aviation  Administration  Regulations
applicable to its products.  Because the products are exterior to
the aircraft, can be operated with a hand-held controller and can
be  jettisoned, the compliance process is not expected to have  a
material  adverse  impact  on the Company's  business.   Military
customers may purchase the products as "commercial off-the-shelf"
or  may  seek  a  militarized version  meeting  certain  military
specifications.   The U.S. Department of Commerce  has  evaluated
the  SkyHook  products and determined that they  do  not  require
export licenses.
                                 4
<PAGE>
           Employees.  SkyHook currently employs 17 persons  full
           --------- 
time,  including  four in administration, three in  research  and
development, five in operations and five in sales and  marketing.
There   are   four  part-time  employees,  one  is  employed   in
administration,  three are employed in operations.   The  Company
intends to maintain a small staff by outsourcing activities  when
possible.   SkyHook  also maintains  sales  offices  through
independent  representatives  in  Atlanta,  Georgia;  San  Diego,
California; Seattle, Washington and Washington, D.C.

     BioMeridian 

           Products.  BioMeridian has a license to sell an  Electrodermal
          ----------
Screening  ("EDS") product called the LISTEN.   This  product  is
used  by  healthcare  practitioners  to  measure  the  stress  in
bioelectromagnetic  systems (also known as  "meridians")  of  the
human  body.  If stress or imbalance is detected, the  LISTEN  is
used  to  recommend a course of treatment or therapy to alleviate
the  stress or to restore balance to the body's meridian  systems.
BioMeridian  also provides training classes and support  services
for  health  care  practitioners that  subscribe  to  the  LISTEN
system.

           Markets.   The  emerging market for EDS  equipment  is
           -------
worldwide,  crossing the boundaries of health  care  disciplines.
The  LISTEN  is  useful in the practice of medicine,  osteopathy,
homeopathy, naturopathy, acupuncture, and other disciplines.  

           Competition.   There are at least nine  other  devices
           -----------
sold  throughout  the  world that are  somewhat  similar  to  the
LISTEN.   These products are grouped into two general categories:
(1)  Simple electronic measurement devices, which are  older  and
less  dynamic technology and (2) Computerized devices, which  are
similar in approach to the LISTEN.

           Manufacturing.   BioMeridian currently  assembles  the
           -------------
LISTEN  product in its facility located in Orem,  Utah.   Various
subassemblies of the product have been out-sourced to subcontract
vendors.

          Intellectual Property.  BioMeridian has a perpetual, non-transferable
         ----------------------
royalty-free  license  to manufacture  and sell the LISTEN product.  Since  
acquiring  this license  in  connection with the acquisition  of BioSource,
BioMeridian  has developed a "Windows" based version of software  for
the  LISTEN product.  BioMeridian is presently pursuing copyright
and other protection for the software enhancements.
                                 5
<PAGE>
           
           Government  Regulation.   Use  of  the  LISTEN  system
           ----------------------
internationally is subject to various regulatory requirements  on
a  country  by  country basis.  The product has received  various
forms  of regulatory approval for use in Canada, Australia, South
Africa and Germany.  In the United States, the LISTEN system  has
been termed as a non-significant risk ("NSR") device and has been
issued an investigational device exemption ("IDE") for the entire
hardware/software system.

           Employees.  BioMeridian employs nine persons full time
           ---------  
with   one   part   time  employee.   Three  employees   are   in
administration, two in sales and marketing, two in training,  one
in  engineering  with   one  full  time  and  one  part  time  in
operations.  BioMeridian intends to maintain a  small  staff  by
establishing independent representatives in outlying geographical
locations     domestically    and    independent     distributors
internationally.

     
ITEM 2.   DESCRIPTION OF PROPERTY

     SIS, LLC.

      SIS, LLC leases five facilities.  The facility used as SIS's
headquarters  and  administrative offices contains  approximately
5,800  square  feet.   The lease expires in November  1999.   The
leased facility in Castle Dale, Utah contains approximately 3,600
square feet and expires in December 1998.  The leased facility in
Price, Utah contains 1,350 square feet and expires in March 1999.
The  leased facility in Ephraim, Utah contains 5,600 square  feet
and  is a month to month lease. The Dallas, Texas leased facility
contains  2,400  square feet and expires in December  1998.   The
Montego  Bay, Jamaica leased facility contains 5,000 square  feet
and expires in February 1998.

     SkyHook.

     STI  currently leases three facilities.  The Draper, Utah
facility is the headquarters of Magellan and STI.  It consists of
a 4,200 square-foot office and a 3,000 square-foot high-bay shop.
The  lease  term  has an initial three year term commencing  July
1997  and  a  three  year option.  A separate  manufacturing  and
assembly facility is also located in Draper, Utah.  This facility
has   a   1,800   square-foot  office  and  7,000   square   foot
warehouse/manufacturing  area.  The lease  term  has  an  initial
thirty  month  term  commencing January 1998  and  a  three  year
option.
     
     STI's  Lexington,  Kentucky sales office is a 500-square-foot
office  of the Blue Grass Station of the Kentucky National Guard,
and  is  leased from the Commonwealth of Kentucky.   The  initial
lease term is one year, with five one year renewal options.
                                 6
<PAGE>
     
     BioMeridian 
     
     BioMeridian  currently   leases   one
facility in Orem, Utah.  The facility consists of a 4,100 square-
foot office.  The lease expires May 1999.
     
ITEM 3.   LEGAL PROCEEDINGS

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      On October 28, 1997, the Company held a special meeting  of
shareholders  (the  "Special Meeting")  at  which  the  following
matters  were submitted to a vote of the shareholders:   Proposed
amendments to the Company's 1994 Stock Incentive Option Plan (the
"Option  Plan")  to  increase  by  1,800,000,  from  700,000   to
2,500,000  the  number of shares of Common  Stock  available  for
issuance  pursuant to grants under the Option  Plan,  to  provide
that  the  Option Plan will be administered by  the  Board  or  a
Committee of non-employee Directors and to terminate the  formula
award provision of the Option Plan.

      The amendments to the Option Plan were proposed in order to
effect  changes  which  the  Board  of  Directors  believes  were
necessary  to increase the number of shares available for  making
grants  of  stock  options under the Option  Plan  to  adequately
attract  and  retain qualified individuals to manage and  promote
the   subsidiary  operations  of  the  Company.    The   proposed
amendments  to the Option Plan were approved by the  shareholders
with 10,552,635 shares voting in favor, no shares voting against,
and no broker non-votes.

                                 7
<PAGE>

                             PART II

ITEM 5.   MARKET   FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER
          MATTERS

Market Information. The Company's common stock is traded in the 
over-the-counter market.  The following table sets forth the  
range of quotations for the Company's common stock for the quarters indicated.  
Such quotations reflect inter-dealer prices, without retail  mark-up, mark-down 
or commission, and may not necessarily represent actual transactions.

Fiscal Year Ended December 31, 1997

                                               High       Low
                                                Bid       Bid

     First Quarter  . . . . . . . . . . . .    $1.25      $   .75
     Second Quarter . . . . . . . . . . . .    $1.37      $   .87
     Third Quarter  . . . . . . . . . . . .    $1.94      $  1.00
     Fourth Quarter . . . . . . . . . . . .    $3.00      $   .87

Fiscal Year Ended December 31, 1996

                                               High       Low
                                                Bid       Bid

      First Quarter . . . . . . . . . . . .    $  .42    $   .42
      Second Quarter  . . . . . . . . . . .    $ 1.00    $   .35
      Third Quarter . . . . . . . . . . . .    $ 1.00    $   .70
      Fourth Quarter  . . . . . . . . . . .    $ 1.37    $   .75

     Shareholders.   The  approximate number of  shareholders  of
     ------------ 
record of the Company's common stock as of March 31, 1998  was approximately
one  hundred  and  fifty (150),  which  does  not  include
shareholders  whose  shares  are  held  in  securities   position
listings.
     
     Dividends.   The Company has not paid any cash dividends  on
     ---------
its common stock, and does not anticipate paying dividends in the
foreseeable  future.   The Company presently  intends  to  retain
future  earnings, if any, for financing the growth and  expansion
of the Company.
     
     Unregistered  sale of securities. In October 1997 the Company completed a
     -------------------------------- 
share  exchange  pursuant  to  an Agreement  and  Plan  of  Share
Exchange   between   the  Company,  BioSource,   Inc.   and   the
shareholders of BioSource, Inc.  The issuance of shares of common
stock of the Company to individuals or entities pursuant to  such
share  exchange was made in reliance upon the exemption  provided
by section 4 (2) of the Securities Act of 1933.
     
                                 8
<PAGE>
     The  Company  sold 26,667 shares of stock for 37  cents  per
share   to  two  individuals  pursuant  to  the  Company's  stock
incentive  plan.     The  proceeds were used  for  the  operating
purposes  of  the Company.  The issuance of the shares  of  stock
were  made  in reliance upon the exemption provided by section  4
(2) of the Securities Act of 1933.
     
ITEM  6.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF
OPERATION

      During 1997 Magellan continued its efforts to position  the
Company for future growth opportunities.

      Effective October 21, 1997 the Company completed a transaction through 
its wholly owned subsidiary holding company,ProHealth, Inc. (formerly known 
as SIS, Inc.) to acquire all of the outstanding common stock of BioSource.  The 
new and surviving entity was named BioMeridian.  Subsequent to Dec. 31, 1997 
the Company and the stockholders of BioSource entered into a settlement 
agreement to further clarify their ongoing business relationship. The net effect
of these agreements included the issuance of 225,000 shares of Magellan common 
stock, the payment of $190,000 in cash; $105,000 at closing and $85,000 in 
various installments over a nine month period ending July 1998.  As part of the 
transaction, the Company recognized goodwill of $358,997.
        The  addition  of  BioMeridian to the  Magellan  family  of
companies  has  effectively positioned BioMeridian to  compete  in  the  
emerging "Alternative Health Care"  marketplace.   

Results of Operations

     SIS, LLC.

     During 1997, SIS, LLC achieved sales of $4,015,000, compared
to  $2,140,000  for  combined sales of SIS, LLC  and  SIS  during  all  of
calendar 1996.  This represents an increase of 93%.  The net loss
for  the  corresponding  periods  was  $148,000  for  1997  and
$162,000 for 1996. The Company's share of these losses was $68,960 
and $86,800 respectively. These losses are  the
result  of new management's intent to pursue rapid growth in  the
healthcare industry while aggressively expensing costs associated
with  that  growth.   SIS, LLC continues  to  incur  considerable
expenses  in  order  to  position itself for  growth,  including:
creating a new data capture facility in Dallas, Texas; developing
strategic  selling relationships with four affiliated  companies;
joint-developing  three  new product offerings  with new affiliated
companies; and hiring additional personnel in Project Management,
Programming Operations Management and Sales/Marketing.

      The  1996  financial statements of the Company reflect  the
operations  of SIS, Inc. through July 31, 1996 and  then  reflect
its interest in the earnings/(losses) of SIS, LLC after August 1, 1996.
                                 9
<PAGE>
     SkyHook.

      SkyHook  did  not have any revenues in 1997 or  1996.  SkyHook
  began  marketing the SkyHook external  cargo  management
system  ("ECMS")  during  the summer of  1997.   In  addition  to
aggressively   marketing  the  system  to  potential   customers,
particularly the United States Military, SkyHook continued to
develop  and  test  its  products.   In  late  1997  SkyHook
introduced  the  Light  Ariel  Delivery  System  or   "LADS"   to
compliment  its  original product, the  ECMS.   There  can  be  no
assurance,   however,  that SkyHook will   not   encounter
unanticipated  events or problems that could delay the  marketing
and  distribution of the SkyHook ECMS or LADS, that SkyHook
will be able to successfully market the SkyHook products, or that
these products will achieve significant market acceptance.

     The  1996  financial statements of the Company  reflect  the
operations  of  STI  from October 15, 1996 through  December  31,
1996.
     
     BioMeridian 

     The  1997  financial statements of the Company  reflect  the
operations of BioMeridian from October 21, 1997 through  December
31,  1997.  During that period the BioMeridian achieved sales  of
$319,000 which resulted in an operating loss of $89,500 for  that
period.

Liquidity and Capital Resources

      The  Company's sources of liquidity have historically  been
cash  from operations, working capital lines of credit  and  debt
and  equity financing.  Until August 1, 1996, the effective  date
of  the  formation of SIS, LLC, the operations of  SIS,  were  the
Company's only source of cash from operations.  Under the terms of the
joint  venture, it is unlikely that the Company will receive  any
cash  from the operations of the joint venture in the foreseeable
future  because it is anticipated that any cash will be  retained
by  the  joint venture to fund the operations and growth  of  the
joint  venture.  In addition, SkyHook is still in the development
stage,  has  not  sold  any products and has  not  generated  any
revenue,  and  BioMeridian was not profitable  during  the  final
quarter of the year.

      As  a result, the Company is currently relying solely on debt and  its
ability to raise additional debt and equity financing in order to
finance  the  continued development of the SkyHook  products  and
their introduction into the market place.  On-going operations of
the  Company  are currently consuming approximately  $250,000  of
cash  each  month  and the Company expects to continue  to  incur
substantial additional expenses in connection with the  marketing
and introduction of SkyHook products into the market place.

      During  1997  and  1996 the Company  entered  into  several
agreements to borrow necessary funds.

                                 10
<PAGE> 
      During 1997 a Director/Shareholder who also serves as the Chief Executive
Officer loaned $500,000 to the Company  through five separate $100,000 notes 
through either himself or entities in which he held a controlling interest. The 
notes bear interest at 12% and are payable upon demand.  Effective February 27, 
1998 these notes were converted to common stock of the Company.  In addition, 
the interest payable of approximately $35,500 was used by the 
Director/Shareholder to exercise warrants to purchase common stock. In addition,
the Director/Shareholder loaned $400,000 to the Company subsequent to the year 
ended December 31,1997.  Effective February 27, 1998 the Director/Shareholder
converted these notes payable to common stock.  The interest payable of 
approximately $2,500 was used by the Director/Shareholder to exercise warrants  
to purchase common stock.

      During 1997 a Director/Shareholder loaned $250,000 to the Company throug
two separate notes of $100,000 and $150,000 respectively.  The notes bear 
interest at 12% and are payable upon  demand.  Effective February 27, 1998 these
notes were converted to common stock of the Company.  In addition, the interest
payable of approximately $8,500 was used by the Director/Shareholder to exercise
warrants  to purchase common stock.

      The  Company has entered into two separate revolving  line-of-
credit  agreements.  Each agreement is  for a  $750,000  line-of-
credit.  Each line of credit bears interest at a variable rate of
prime  plus 1.5%.  One line matures on April  30, 1998 and the  other
matures  on  July 20, 1998.  Both lines are secured by  inventory
and  the  personal guarantees of the Company's  Chief  Executive
Officer, a Director and a principal shareholder.  As of December 31, 1997 the 
lines had balances outstanding of $745,000 and $740,000 respectively. The
lines are being used to fund the operations of the Company.

      The  Company  entered into a non-revolving  line-of  credit
agreement  during  late 1997.  The line is  for  $1,200,000   and
bears  interest a variable rate of prime plus 1.0%.   The  line
matures  on  May 21, 1998.  The line is secured by inventory  and
the personal guarantees of the parties referred to above.  As of December 31, 
1997 the line had a balance outstanding  of  $700,000.  The line is being used  
to fund the operations of the Company.

     During  1996 the Company entered into two agreements to borrow $500,000 in 
unsecured notes  payable  from SIS, LLC.  The notes consist of  a  $350,000
note and a $150,000 note.  These funds were used to complete  the
acquisition of STI.  Each note bears interest at a variable  rate
of  Prime  minus  1%.  Principal payments of  $9,722  and  $4,167
respectively on a monthly basis commence October 1998.  SIS,  LLC
has no obligation to distribute future earnings to the Company.
     
      In  connection with the acquisition of SkyHook, the Company
assumed responsibility for a note payable to a government entity.
The  balance of the note was $65,906 at December 31, 1996.  Terms
of  the  note include interest at 8% and monthly installments  of
$2,507.  The note is secured by inventory and personal guarantees
of two former STI officers and one present STI director.

                                 11 
<PAGE>
      
      The Company had a deficit in working capital as of December
31,  1997  of  $3,136,800 as compared to  a  deficit  in  working
capital of $62,904 as of December 31, 1996.  As indicated  above,
the Company will require additional equity and/or debt financing
in  order to fund the continued operations of the Company.  There
can  be  no  assurance,  however, that  such  financing  will  be
available on terms favorable to the Company, if at all.   If  the
Company is unable to raise additional capital, the ability of the
Company  to  successfully market and distribute its products  and
services   and  its  financial  condition  would  be   materially
adversely affected.

Factors Affecting Future Results

      The  Company's  future  operations and  liquidity  will  be
affected  by among other factors, the amount of time it takes  to
bring  the SkyHook products to market, the ability of the Company
to  raise  sufficient  debt or equity in  order  to  finance  the
continued  operations of the Company, new products introduced  by
competitors,  and  the  ability of the  Company  to  successfully
market  and  sell the SkyHook products at acceptable prices.   If
the  Company  is unable to raise sufficient capital,  the  market
acceptance of the SkyHook products is delayed, or if the  SkyHook
products  do  not achieve market acceptance, this  would  have  a
material adverse affect on the Company's financial condition  and
results of operations.

ITEM 7.   FINANCIAL STATEMENTS

     The consolidated financial statements of the Company and its
wholly-owned subsidiaries can be found on pages F-1 through  F-24
of this Form 10-KSB.


ITEM 8.   CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS   ON
          ACCOUNTING AND FINANCIAL DISCLOSURES

          None.

                            PART III

ITEM 9.   DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS  AND  CONTROL
          PERSONS;  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
          ACT

Directors and Executive Officers

     The  table  below sets forth the name, age and positions  or
offices  of  each  director  and executive  officer  of  Magellan
Technology (MTI) and its subsidiaries, SkyHook Technologies, Inc.
(STI),  ProHealth,  Inc. (PHI), BioMeridian  International,  Inc.
(BII) and Magellan Service Company (MSC).  The Board of Directors
of  MTI also serve as the Board of Directors of STI, PHI, BII and
MSC.
                                 12
<PAGE>

Name                     Age                   Position
-----                   -----                  ---------

William  A.  Fresh        69      Chairman of the Board and Chief Executive
                                  Officer MTI, STI, PHI, BII and MSC
Reginald Hughes           53      Director; President and Chief Operating 
                                  Officer, BII
Darwin  Millet            45      Director; President and Chief Operating 
                                  Officer of SIS, LLC
Richard I. Winwood        55      Director
Blair  K. Blacker         54      President and Chief Operating Officer, STI; 
                                  Executive Vice President, MSC
Douglas  M.  Angus        38      Secretary, Vice  President, and Chief 
                                  Financial Officer, MTI, STI, PHI, BII and MSC
Irving Monclova           66      President, MSC
Robert S. Lawrence        47      Vice President of Engineering, STI
Christopher  R.  Redd     48      Vice President DoD Sales and Marketing, STI
Keith R. Gramke           38      Director of Operations, STI

     William A. Fresh has served as Chairman of the  Board and Chief Executive  
Officer of Magellan since its incorporation in June of 1989.  He currently 
serves as a director  of  Cerprobe Corporation, a manufacturer of probe cards 
utilized in the final test of ICs in the semi-conductor industry.  Mr. Fresh is 
a past director of EFI Electronics Corporation, a Utah manufacturer and marketer
of surge suppression equipment for computer, industrial, medical and 
telecommunications devices.  Mr. Fresh founded EFI in 1981 and subsequently 
served as its chairman and president until 1986.  Mr. Fresh is currently 
chairman, president and  owner  of Orem Tek Development Corporation, a Utah 
consulting and business park development corporation.  Mr. Fresh also serves on 
the Board of Directors of Sento Technical Innovations Corporation, a 
publicly-traded software company.
     
     Reginald Hughes was elected to the Board of Directors in 1996.  He is the  
President and Chief Operating Officer of BioMeridian International, Inc., and a
director of Magellan Technology, Inc.;  He co-founded STI in 1995.  From 1981 to
1994, he served in various capacities with Eyring Corporation, a high tech firm
in Provo, Utah, specializing in  defense contracting.  While with Eyring, Mr. 
Hughes was promoted to the positions of Director and Vice President of Finance.
Prior tojoining Eyring Corporation, Mr Hughes had a successful career as a 
Hospital Administrator.
     
     Richard  I.  Winwood joined the Board of  Directors  of  the
Company and SIS early in 1995.  Mr. Winwood is currently Chairman
of  the  Board of Keystone Aviation, a business aircraft services
company  based at the Salt Lake International Airport.   He  also
currently serves on the Board of Directors of AVM Technology Inc.
and  Carbon Fibre Products, Inc.  In 1983, Mr. Winwood co-founded
Franklin Covey Co., and subsequently served as its Executive Vice
President  and  Chief  Operating Officer.  Franklin  Covey  is  a
multinational,  time  management training  and  products  company
traded  on  the  New York Stock Exchange.  Prior  to  co-founding
Franklin  Covey,  Mr.  Winwood had a  successful  career  in  the
computer  services industry, working with General  Electric  Co.,
Automatic   Data   Processing,   Inc.   and   Computer   Sciences
Corporation.
                                 13
<PAGE>
     
     Darwin D. Millet has been a member of the Board since  1994.
Currently,  he is President and Chief Operating Officer  of  SIS,
LLC.  Prior to coming to SIS, Mr. Millet served as Executive Vice
President of Layton Construction Co.,  Inc. ("LCC") from 1992  to
1993, and as Chief Financial Officer from 1986 to 1991.
     
     Blair K. Blacker is President and Chief Operating Officer of
SkyHook Technologies.  He also serves as Executive Vice President
of  Magellan Service Company.  From 1991 until joining SkyHook in
1996, Mr. Blacker served as a Site Manager and Deputy Director of
Raytheon E Systems' Serv-Air in Lexington, Kentucky.  Mr. Blacker
served  in  the  United States Army for 26 years.   His  military
career   culminated  in  the  command  of  an  Aviation   Brigade
consisting  of  over  200  helicopters and  1,700  soldiers.   He
retired as a full Colonel.

     Douglas  M. Angus serves as Secretary to the Board and  Vice
President  of  Finance and Chief Financial Officer  for  Magellan
Technology  Inc. and each of its subsidiaries.  Mr. Angus  joined
the  Magellan family of companies in late 1996 as Vice  President
and  Chief  Financial  Officer.  Prior to joining  Magellan,  Mr.
Angus  served as the General Manager of Arcadia International,  a
private  manufacturing concern.  From 1991 to 1994 Mr. Angus  was
CFO  and  Treasurer for Eyring Corporation (a high tech  software
defense contractor).  Mr. Angus also worked as a Certified Public
Accountant for seven years with the international accounting firm
of  Deloitte and Touche where he was promoted to the position  of
Manager.
     
     Irving  Monclova  is President of Magellan Service  Company.
He  joined Magellan in late 1996.  Mr. Monclova  began his career
in  the  military.   He had tours in Europe, Korea,  Republic  of
Vietnam,  Panama  and  Puerto Rico.  He culminated  his  military
career  as Commander of readiness programs of the reserve forces.
In  1982,  he joined Serv-Air, Inc.  In 1989, he was promoted  to
Vice  President of Operations and Maintenance and transferred  to
Headquarters,  Serv-Air,  Inc., Greenville,  Texas.   In  January
1993, he was promoted to the position of Vice President and Chief
of Special Operations Programs.
     
     Robert  S.  Lawrence  is Vice President of  Engineering  for
SkyHook Technologies, Inc.  Prior to joining SkyHook in late 1997
Mr. Lawrence was employed with the Bluegrass Avionics Division of
Raytheon  E-Systems  where  he  served  as  Manager  of  Avionics
Integration.   Mr. Lawrence enjoyed a twenty-two year  career  in
the  U.S.  Army  where  he received many  awards  and  began  the
development of his unparalleled experience in rotor wing avionics
and avionics integration.
     
                                 14
<PAGE>

     Christopher  R. Redd serves as Vice President of  DoD  Sales
and  Marketing  for SkyHook Technologies, Inc.  Mr.  Redd  joined
SkyHook  in mid 1997.  Chris served 20 years of active duty  with
the  U.S. Army in logistics and aviation management.  He  served
another  10  years as a civilian logistics management specialist,
with expertise in Blackhawk helicopter nonstandard programs,  for
the  Program Executive Office for Aviation, U.S. Army.  Mr.  Redd
is  a  highly decorated veteran of Vietnam, Grenada, and  Panama.
He is also the most highly decorated civilian of Operation Desert
Storm for his service with the U.S. Army.
     
     Keith  R.  Gramke,  is  Director of Operations  for  SkyHook
Technologies,  Inc.   Prior to joining  SkyHook  in  1996,  Keith
worked for two divisions of Raytheon E Systems: first with  Serv-
Air, Inc. (SAI) as Aviation Trainer Program Manager and later for
Advanced Technical Systems Support (ATS2) as Program Manager  for
aviation  related  programs.  After graduating  from  the  United
States  Military Academy at West Point, NY in 1982, Keith  served
in the U. S. Army for 9 years in various locations and positions.
His  military service was characterized by increasing  leadership
and  responsibility  in  helicopter aviation-related  operations,
culminating  in  the successful command of an  attack  helicopter
company.

Committees  and Meetings.  The Board of Directors met  seven  (7)
times  during  the  1997  fiscal year.   Each  of  the  directors
attended  at least 75% of the meetings of the Board of  Directors
and of the committees on which he served.

       The  Board  of  Directors  maintains  standing  Audit  and
Compensation Committees.  The members of the Audit Committee  are
William  A. Fresh and Darwin Millet.  The Committee met  one  (1)
time  during  the  fiscal  year ended  December  31,  1997.   Its
functions are (i) to review and approve the selection of, and all
services performed by, the Company's independent auditor; (ii) to
review  the  Company's internal controls;  and  (iii)  to  review
accounting and financial controls of the Company.

      The  members of the Compensation Committee are  William  A.
Fresh  and Richard I. Winwood.  The Committee met four (4)  times
during  the  fiscal year ended December 31, 1997.  Its  functions
are  to  determine  and  approve  compensation  arrangements  for
executive  officers  of  the Company and  to  oversee  any  stock
option, stock award or other employee benefit plan or arrangement
established  by  the  Board  of  Directors  for  the  benefit  of
executive officers of the Company and management.

                                 15
<PAGE>

Section  16(a) Beneficial Ownership Reporting.  Section 16(a)  of
the  Exchange  Act requires the Company's executive officers  and
directors and persons who own more than 10% of the Common  Stock,
to  file  with  the U.S. Securities and Exchange Commission  (the
"Commission") initial reports of ownership and reports of changes
in  ownership of the Common Stock and other securities from which
shares  of  the  Common  Stock may be derived.   Such  directors,
officers and 10% owners are required by Commission regulations to
furnish the Company with copies of all Section 16(a) reports they
file.   Based  solely on a review of the copies of  such  reports
received  by the Company, the Company believes that the following
reports were not filed on a timely basis: WAF Investments Form  3
due  6/5/95;  filed 2/13/97, WAF Investments Form 5 due  2/14/96;
filed 2/13/97, Darwin Millet Form 5 due  2/14/95; filed 2/14/97,  Darwin
Millet form 5 due 2/14/96; filed 2/14/97, Doug Angus Form 5 filed 2/17/98;
Form  4  due  9/10/97,  Ballard Investments  form  5  due 2/14/95; filed 
2/27/97, Ballard Investments Form 5  due  2/14/96;  filed 2/27/97, 
William A. Fresh  Form 5 filed  2/17/98; Form 4 due 9/10/97.

ITEM 10.  EXECUTIVE COMPENSATION

     Summary Compensation Table. The following table sets  forth,
for   the  three  fiscal  years  ended  December  31,  1997,  the
compensation paid to the Company's Chief Executive  Officer.   No
executive  officer  of  the  Company received  salary  and  bonus
compensation in excess of $100,000.  The Chairman and CEO of  the
Company has agreed to serve without salary compensation until the
Company achieves profitable operations.  In April 1997 the  Board
granted a  stock  option  to  the Company's CEO for 250,000 shares 
of common stock.
     
                                                                  Long-term
                          Annual Compensation                   Compensation
                   __________________________________________    ___________
          Name                                     Other
          and                                      Annual        Securities
        Principle              Salary   Bonus    Compensation    Underlying
        Position         Year    ($)     ($)         ($)         Options
_______________________________________________________________  ___________

William A. Fresh         1997    -0-      -0-         -0-          250,000
Chief Executive Officer  1996    -0-      -0-         -0-            -0-
                         1995    -0-      -0-         -0-            -0-
_____________________

                                  17
<PAGE>
Option Grants in Last Fiscal Year
        The following table sets forth the options granted to executive 
        officers in the last fiscal year.
                        
                                  %of Options
       Name and      Number        Granted to
       Principle    of Options     Employees in      Exercise   Expiration
       Position      Granted       Fiscal Year       Price        Date
------------------------------------------------------------------------------
William A. Fresh    250,000          22%              .37       April 2004
CEO
Douglas M. Angus     50,000           4%              .37       June  2004
Vice President
------------------------------------------------------------------------------




Aggregated Option Exercises in Last Fiscal Year and Year End Option Values

        The following table sets forth the aggregate value of options to acquire
shares of the Common Stock held by the Chief Executive Officer on 
December 31, 1997.

                                                        Value of Unexercised
                            Number of Unexercised      In-the-Money Options at
                             Options at FY-End(#)        FY-End ($)(1)_____
                            ----------------------     -----------------------
       Name               Unexercisable/Exercisable   Unexercisable/Exercisable
--------------------      -------------------------   -------------------------
William A. Fresh                 500/250,500                  0/$156,250 
____________________

(1)   Calculated  based  on the difference between  the  exercise
  price and the price of a share of the Company's Common Stock on
  December 31, 1997.

     Director Compensation.  Directors of the Company are currently paid no
     ---------------------
fee for their service on the Board of Directors.  Directors  are
also not currently paid a fee for, or reimbursed for expenses incurred with
respect to, attendance at board or committee meetings.

ITEM  11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND
            MANAGEMENT

      The  following table lists the number of shares  of  Common
Stock  beneficially owned as of March 31, 1998, by each person
known by the Company to be the beneficial owner of more than five
percent  (5%)  of  the  Common Stock, by  each  director  of  the
Company, by the Chief Executive Officer, and by all officers  and
directors  of  the  Company as a group.  Unless noted  otherwise,
each  person  named  has  sole voting and investment  power  with
respect to the shares indicated.

                                 18                                          
<PAGE>         
                                                       Beneficial Ownership
                                                       As of March 31, 1998
                                                     -----------------------
                                                                  Percentage
                                                 Number of         of Class
Name  and  Address  of Beneficial  Owner          Shares          Outstanding
-----------------------------------------        ---------       -------------
William A. Fresh                                 5,066,269(1)         30.8%
2238 E. Gambel Oak Drive
Sandy, Utah  84092

Richard Winwood                                  3,647,715(2)         22.2%
7069 S. Highland Drive, Suite 102
Salt Lake City, Utah  84121

Ballard Investments                              1,709,987(3)         10.4%
2611 East 1300 South
Salt Lake City, Utah  84108

Reginald Hughes                                    504,991(4)          3.1%
1482 East 920 South
Provo, Utah  84606

Darwin D. Millet                                   285,503(5)          1.7%
12090 South Woodridge Road
Sandy, Utah  84124

Douglas M. Angus                                    84,167(6)           .5%
589 East 2150 South
Bountiful, Utah  84010

All officers and directors as                     9,588,645          58.31%
a group (5 persons)

The  percentages  set  forth above have been  computed  based  on
16,444,017  shares, which is the number of shares of  the  Common
Stock  outstanding and exercisable warrants and options  held  by
officers  and directors, excluding treasury shares  held  by  the
Company, outstanding as of March 31, 1998.
________________________

(1)   Includes 1,386,750 shares held by WAF Investment  Company,  a
Utah  limited  partnership,  of which  Mr.  Fresh  is  a  general
partner,  1,133,332  shares  held by Reva  Luana  Fresh,  spouse,
50,000  shares held by the William A. and Reva Luana Fresh Family
Living  Trust,  100,000 shares held by William A.  &  Reva  Luana
Fresh Charitable Remainder Trust, 60,000 shares held in trusts in
which  Reva Luana Fresh is the custodian, 316,667 shares held
by Orem Tek Development, a Utah S Corporation, of which Mr. Fresh
is a shareholder, 163,393 share issuable upon the exercise of currently 
exercisable warrants, and 250,500 shares issuable upon presently exercisable 
options.

(2)   3,139,150 shares  are held by Keystone Ventures,  L.C.,  a  Utah
limited  liability  company, of which Mr. Winwood  is  a  member.
Includes  146,184 shares issuable upon the exercise of  currently
exercisable warrants.
                                 19
<PAGE>

(3)   Includes  170,837  shares  issuable  upon  presently
exercisable  warrants.   Craig  Ballard,  a  general  partner  of
Ballard Investments, has the power to vote the shares and to make
investment  decisions with respect to the  shares  on  behalf  of
Ballard Investments.

(4)   The  shares  are held by a Utah limited  liability
partnership of which Mr. Hughes is a general partner

(5)   Includes  93,836  shares issuable  upon  presently
exercisable warrants or options which become exercisable  in  the
next 60 days.

(6)    Includes 64,167 of presently exercisable options.



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Revolving  Line  of  Credit Guaranties.   During 1997 the
      --------------------------------------
Company entered into two separate line of credit agreements. Each
of  these  agreements is for a $750,000 revolving line of  credit
secured  by  inventory and receivables.  Three of  the  Company's
major   stockholders  have  individually,  personally  guaranteed
$500,000  (one  third of the total of the two lines  which  total
$1,500,000).   Two of these individuals also serve as  Directors,
one  of  which  also  serves  as the  Company's  Chief  Executive
Officer.  The lines of credit bear interest at prime plus 1.5%  .
As of December 31, 1997,  $740,000 and $745,000 respectively were
outstanding under these line of credit agreements.

      Non-Revolving Line of Credit Guaranties.  During  1997  the
      ----------------------------------------
Company  entered  into a non-revolving line of credit  agreement.
The  agreement is for a $1,200,000 non-revolving line  of  credit
secured  by  inventory and receivables.  Three of  the  Company's
major   stockholders  (two  individuals  and  one  entity)   have
personally  and  jointly guaranteed up to  $1,200,000.   The  two
individuals also serve as Directors, one of which also serves  as
the  Company's Chief Executive Officer.  The line of credit bears
interest  at prime plus 1.0%.  As of December 31, 1997,  $700,000
was   outstanding  under  this  non-revolving  line   of   credit
agreement.
        
                                 20
<PAGE>
        Notes Payable to a Shareholder.  During 1997 a Director/Shareholder
        -------------------------------
who also serves as the Chief Executive Officer loaned $500,000 to the Company
through five separate $100,000 notes through either himself or entities in
which he held a controlling interest.  The notes bear interest at 12% and are
payable upon demand.  Effective February 27, 1998 these notes were converted 
to common stock of the Company at 75 cents a share.  In addition, the interest 
payable of approximately $35,500 was used by the Director/Shareholder to 
exercise warrants to purchase common stock, the warrants had exercise prices 
of 20 cents to 37 cents a share.  In addition, the Director/Shareholder loaned 
$400,000 to the Company subsequent to the year ended December 31, 1997.
Effective February 27, 1998 the Director/Shareholder converted these
notes payable to common stock at 75 cents a share.  The interest payable
of approximately $2,500 was used by the Director/Sharholder to exercise 
warrants to purchase common stock, the warrants had exercise prices of 
20 cents to 37 cents a share.


        Notes Payable to a Shareholder.  During 1997 a Director/Shareholder 
        -------------------------------
loaned $250,000 to the Company through two separate notes of $100,000 and 
$150,000 respectively. The notes bear interest at 12% and are
payable upon demand.  Effective February 27, 1998 these notes were converted 
to common stock of the Company at 75 cents a share.  In addition, the interest 
payable of approximately $8,500 was used by the Director/Shareholder to 
exercise warrants to purchase common stock, the warrants had exercise prices 
of 20 cents to 37 cents a share.  

        Notes  Payable.  As of December 31, 1997, the  Company  owed
       ----------------
$42,389 to a government entity.
Terms of the note include interest at 8%, monthly installments of
$2,507.  The note is secured by inventory and personal guarantees
from  a  Director  and two individuals.  The two individuals  are
former  STI officers, the director is also an officer of  one  of
the Company's subsidiaries.

       Payroll  Guaranty.   The president of  BII  has  personally
       ------------------
guaranteed the monthly payroll of STI.  The agreement is  between
the president of STI and a third party employee leasing company.
                                 
                                 21
<PAGE>

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits. The following documents are furnished as exhibits to this 
            Form 10-KSB

  S-B                                                   Incorporated    Filed
Item No.            Description                         by Reference   Herewith
--------            -----------                         -------------  --------
    
 3-1     Articles of Incorporation of the Company            (1)

 3-2     Amendment to Articles of Incorporation approved     (2)
         March 8, 1996

 3-3     By-Laws of the Company                              (3)

10-1     Settlement Agreement with the Shareholders of 
         BioSource                                                          X

21-1     Subsidiaries of the Company                                        X

27-1     Financial Data                                                     X

_______________________

(1)   This  exhibit was filed with the Commission as  an
      exhibit  to the Company's Registration Statement on Form  S-
      18,  filed on September 20, 1989, and is incorporated herein
      by reference.

(2)   This  was incorporated with the Company's Annual Report  on
      Form  10-KSB for the year ended December      31, 1995  filed  on
      March 29, 1996.

(3)   This exhibit was filed previously with the Commission
      as an exhibit to the Company's Annual Report on  Form 10-KSB
      for  the  fiscal  year ending December 31,  1992,  filed  on
      October 15, 1993.

     (b)  Reports on Form 8-K.

     (A)   The  Company filed a Report on Form 8-K dated  November  3,
     1997  reporting  the acquisition BioSource, Inc.   The  financial
     statements of BioSource, Inc. were filed as part of the report.
                                
                                 22                          
<PAGE>                                
                                
                           SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act,
the  registrant caused this report to be signed on its behalf  by
the undersigned, thereunto duly authorized.

                           MAGELLAN TECHNOLOGY, INC.



                            By:/s/ William A. Fresh
                               _____________________
                               William A. Fresh, Chief Executive Officer

                            Date:  April  14, 1998

      In  accordance with the Exchange Act, this report has  been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

     Name                          Position                          Date
     ----                          --------                          -----
/s/William A. Fresh     Chairman of the Board of Directors      April 14, 1998
-------------------     and Chief Executive Officer(Principal       
   William A. Fresh     Executive and Financial Officer)     

/s/Reginald Hughes      Director                                April 14, 1998
-------------------          
   Reginald Hughes


/s/Richard I. Winwood   Director                                April 14, 1998
---------------------          
   Richard I. Winwood

/s/Darwin D. Millet     Director                                April 14, 1998
-------------------          
   Darwin D. Millet

                                 23
<PAGE>







                                                   MAGELLAN TECHNOLOGY, INC.
                                  Index to Consolidated Financial Statements
-----------------------------------------------------------------------------







                                                                Page
                                                               ------
     
Independent auditors' report                                    F-1

Consolidated balance sheet                                      F-2

Consolidated statement of operations                            F-3

Consolidated statement of stockholders'
equity (deficit)                                                F-4

Consolidated statement of cash flows                            F-5

Notes to consolidated financial statements                      F-6




                      
                      
<PAGE>                      
                      
                                               INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders
of Magellan Technology, Inc.


We have audited the consolidated balance sheet of Magellan Technology, Inc.
(the Company) as of December 31, 1997, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1997 and 1996.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free of 
material misstatement.  An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the financial statements.  An audit 
also includes assessing the accounting principles used and significant 
estimates made by management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Magellan Technology,
Inc. as of December 31, 1997, and the results of their operations and their cash
flows for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming 
that the Company will continue as a going concern.  As discussed in note 2 to 
the consolidated financial statements, there is substantial doubt about the 
ability of the Company to continue as a going concern.  Management's plans
in regard to that matter are also described in note 2.  The consolidated 
financial statements do not include any adjustments that might result from the 
outcome of this uncertainty.

                                             TANNER+Co.

Salt Lake City, Utah
February 13, 1998 except for Note 19,
which is dated February 27, 1998
                                  
                                  
                                                                            F-1
<PAGE>
                                                    MAGELLAN TECHNOLOGY, INC.
                                                   Consolidated Balance Sheet

                                                            December 31, 1997
-----------------------------------------------------------------------------

            Assets
            ------
Current assets:
   Cash                                                          $    111,402
   Inventory                                                          375,993
   Prepaid expenses                                                   194,815
                                                                 -------------
             Total current assets                                     682,210

Investment in joint venture                                         1,325,027

Property and equipment, net                                           336,421

Goodwill, net                                                         344,039
                                                                 -------------
             Total assets                                        $  2,687,697
                                                                 -------------
------------------------------------------------------------------------------

            Liabilities and Stockholders' Deficit
            -------------------------------------
Current liabilities:
        Accounts payable                                        $     478,702
        Accrued liabilities                                           206,749
        Related party notes payable                                   750,000
        Notes payable                                               2,210,022
        Current portion of long-term debt                             173,537
                                                                --------------

              Total current liabilities                             3,819,010
                                                                
Long-term debt                                                        591,717
                                                                --------------
              Total liabilities                                     4,410,727
                                                                --------------
Commitments                                                                 -

Stockholders' deficit:
        Common stock, par value $.0002 per share, 25,000,000
         shares authorized, 13,872,505 shares issued and 
         outstanding                                                    2,774
        Additional paid-in capital                                  6,890,419
        Unearned compensation                                       (236,000)
        Accumulated deficit                                       (8,380,223)
                                                                --------------
                Total stockholders' deficit                       (1,723,030)
                                                                --------------
                Total liabilities and stockholders' deficit    $    2,687,697
                                                                --------------
------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements               F-2
<PAGE>

                                        MAGELLAN TECHNOLOGY, INC.
                                        Consolidated Statement of Operations

                                                     Years Ended December 31,

                                                             1997       1996
                                                         ----------------------

Net sales                                                $  319,611  $1,150,046
                                                         ----------------------

Costs and expenses:
        Costs of sales                                       57,180     742,759
        General and administrative                        2,764,150     632,677
        Compensation expense - stock options                252,000           -
        Purchased in-process research and development            -    2,557,114
                                                          ---------------------
                                                          3,073,330   3,932,550
                                                          ---------------------
                Loss from operations                     (2,753,719) (2,782,504)
                                                          ---------------------
Other income (expense):
        Equity in loss of joint venture                     (68,960)    (86,804)
        Interest expense                                   (161,843)    (47,644)
        Other, net                                          (12,870)     (4,427)
                                                          ---------------------
                                                           (243,673)   (138,875)
                                                          ---------------------
                Loss before benefit for income taxes     (2,997,392) (2,921,379)

Benefit for income taxes                                          -           -
                                                           --------------------
                Net loss                                $(2,997,392) (2,921,379)
                                                           --------------------
                Net loss per share                      $      (.22)$      (.33)






-------------------------------------------------------------------------------
See Accompanying notes to consolidated financial statements.               F-3 

<PAGE>
                                                  MAGELLAN TECHNOLOGY, INC.
                    Consolidated Statement of Stockholders' Equity (Deficit)

                                     Years Ended December 31, 1997 and 1996
-------------------------------------------------------------------------------
<TABLE>
<S>                            <C>         <C>       <C>             <C>           <C>              <C>               <C>
     
                                   Common Stock        Additional     Unearned
                                  --------------        Paid-In        Compen-         Accumulated   
                                 Shares      Amount     Capital        sation           Deficit            Total
                                 --------------------------------------------------------------------------------
Balance, January 1, 1996        7,135,936  $  1,427  $  2,587,047    $   -           $   (2,461,452)  $   127,022

Issuance of common stock for:
Acquisition of subsidiary       4,874,936       975     1,802,751        -                      -       1,803,726
Cash                            1,428,572       286       499,714        -                      -         500,000
Accounts payable                  164,727       333         2,912        -                      -          32,945
Services                           16,667         3         6,164        -                      -           6,167

Capital contribution from 
joint venture                           -         -     1,380,765        -                      -       1,380,765

Net loss                                -         -             -        -             (2,921,379)     (2,921,379)
                                 ----------------------------------------------------------------------------------

Balance, December 31, 1996     13,620,838     2,724     6,309,353        -             (5,382,831)        929,246

Issuance of common stock for:
Acquisition of subsidiary         225,000        45        83,205        -                      -          83,250
Cash                               26,667         5         9,861        -                      -           9,866

Issuance of compensatory
stock options and amortization
of unearned compensation                -         -       488,000    (236,000)                  -         252,000

Net loss                                -         -             -         -            (2,997,392)     (2,997,392)
                                ----------------------------------------------------------------------------------       

Balance, December 31, 1997     13,872,505  $  2,774  $  6,890,419  $ (236,000)    $    (8,380,223)  $  (1,723,030)
                               -----------------------------------------------------------------------------------
</TABLE>




---------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.        F-4

<PAGE>
                                                    MAGELLAN TECHNOLOGY, INC.
                                         Consolidated Statement of Cash Flows
                                                     Years Ended December 31,
------------------------------------------------------------------------------
                                                       1997           1996
                                                   ---------------------------
Cash flows from operating activities:
Net loss                                           $ (2,997,392)  $ (2,921,379)

Adjustments to reconcile net loss to
net cash used in operating activities:
    Depreciation and amortization                        41,489        104,296
    Equity in loss from joint venture                    68,960         86,804
    Stock compensation                                  252,000              -
    Common stock issued for in-process research
    and development                                           -      1,587,114
    Common stock issued for services                          -          6,167
    Loss on disposal of property and equipment                -         67,105
    Provision for losses on accounts receivable               -         (8,915)
    Other non-cash expenses                              74,946               -
   (Increase) decrease in:
      Accounts receivable                                18,500        103,330
      Inventories                                      (367,993)             -
      Prepaid expense                                  (188,690)       (50,470)
      Other assets                                            -        (54,654)
   Increase (decrease) in:
      Accounts payable                                  376,800        (23,618)
      Accrued liabilities                               117,362        (81,769)
      Deferred revenue                                        -         (1,439)
                                                     --------------------------
          Net cash used in
          operating activities                       (2,604,018)    (1,187,428)
                                                     --------------------------

Cash flows from investing activities:
    Purchase of property and equipment                 (288,157)      (210,577)
    Net cash investment in joint venture                      -        (17,634)
    Net cash (paid) received in acquisition            (102,890)       242,747
                                                      -------------------------
                 Net cash (used in) provided by
                 investing activities                  (391,047)        14,536
                                                      -------------------------
Cash flows from financing activities:
    Increase in notes payable                         2,185,000        344,642
    Proceeds from related party notes payable           750,000              -
    Proceeds from long-term debt                        111,429        500,000
    Payments on long-term debt                          (38,515)      (232,841)
    Proceeds from issuance of common stock                9,866        500,000
                                                       ------------------------
       Net cash provided by
       financing activities                           3,017,780      1,111,801
                                                       ------------------------
       Net increase (decrease) in cash                   22,715        (61,091)
Cash, beginning of year                                  88,687        149,778
                                                       ------------------------
Cash, end of year                                     $ 111,402    $    88,687
                                                      ------------------------
------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.             F-5
<PAGE>


                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements

                                                   December 31, 1997 and 1996
-----------------------------------------------------------------------------

1. Summary of      The consolidated financial statements consist of Magellan
   Significant     Technology, Inc. (the Company) and its wholly owned 
   Accounting      subsisidiaries, ProHealth, Inc. (ProHealth)
   Policies        (formerly Satellite Image Systems, Inc.), SIS Jamaica, LTD
   Organization    (SIS Jamaica), BioMeridian International, Inc.(BioMeridian)
                   (formerly BioSource, Inc.), which the Company acquired 
                   effective October 15, 1997, and SkyHook Technologies, Inc. 
                   (SkyHook) which the Company acquired effective October 15, 
                   1996.

                   The acquisition of BioSource included the issuance of 
                   225,000 shares of Magellan common stock and cash for all 
                   of the outstanding shares of BioSource common stock.  The 
                   transaction was accounted for as a purchase transaction.  
                   As part of the transaction, the Company recognized goodwill 
                   of $358,997.

                  The acquisition of SkyHook included the issuance of 4,874,936
                   shares of Magellan common stock and cash for all of the 
                   outstanding shares of SkyHook common stock.  The transaction 
                   was accounted for as a purchase transaction.  As part of th
                   is transaction, the Company recognized $2,557,114 as 
                   purchased in-process research and development expense.

                   In addition, on August 1, 1996, the Company transferred its
                   interest in the assets, liabilities, and operations 
                   conducted by SIS,Inc. to Satellite Image Systems, LLC 
                   (SIS, LLC), a joint venture.  The Company received a 49% 
                   interest in SIS, LLC whose assets include those transferred 
                   by the Company as well as $3,000,000 cash transferred by the 
                   other party to the transaction.  Since the Company has no 
                   further obligation for funding of the operations of SIS, 
                   LLC, a $1,380,764 contribution to capital was recognized in 
                   accordance with the provisions of SEC Staff Accounting
                   Bulletin 51.  The financial statements reflect the investment
                   in SIS, LLC under the equity method of accounting.  
                   Summarized financial information for SIS, LLC is included 
                   in note 14.  
                   
                   Business Activity 
                   The Company's  operations  consist of: 1)  manufacturing  and
                   distribution   of  a  medical  device  used  by  health  care
                   practitioners  (conducted by  BioMeridian),  2) manufacturing
                   and  distributing  a  helicopter   cargo  management   system
                   (conducted  by SkyHook),  and 3) providing  image-based  data
                   entry services (conducted by ProHealth and SIS,LLC).
-------------------------------------------------------------------------------
                                                                        F-6
<PAGE>

1. Summary of      Business Activity-Continued
   Significant     Separate information concerning the assets, revenue and  
   Accounting      operation of each segment are included in the financial
   Policies        statments.  All operations of the data entry segment are
   Continued       conducted by SIS, LLC an unconsolidated subsidiary accounted
                   for using the equity method of accounting.

                   Principles of Consolidation
                   The consolidated financial statements include the financial
                   statements of the Company and its subsidiaries, BioMeridian 
                   subsequent to October 15, 1997, SkyHook subsequent to October
                   15, 1996 and SIS Jamaica prior to July 31, 1996.  All 
                   significant intercompany balances and transactions have been
                   eliminated.

                   Estimates in the Preparation of Financial Statements
                   The preparation of financial statements in conformity with
                   generally accepted accounting principles requires management 
                   to make estimates and assumptions that affect the reported 
                   amounts of assets and liabilities and disclosure of 
                   contingent assets and liabilities at the date of the 
                   financial statements and the reported amounts of revenues 
                   and expenses during the reporting period.  Actual results 
                   could differ from those estimates.

                   Concentration of Credit Risk
                   Financial instruments which potentially subject the Company
                   to concentration of credit risk consist primarily of trade 
                   receivables.  In the normal course of business, the Company 
                   provides credit terms to its customers.  Accordingly, the 
                   Company performs ongoing credit evaluations of its customers 
                   and maintains allowances for possible losses which, when 
                   realized, have been within the range of management's 
                   expectations.

                   The Company maintains its cash in bank deposit accounts 
                   which, at times, may exceed federally insured limits.  The 
                   Company has not experienced any losses in such accounts and 
                   believes it is not exposed to any significant credit risk on 
                   cash and cash equivalents.

                   Cash and Cash Equivalents
                   For purposes of the statement of cash flows, the Company 
                   considers all highly liquid debt instruments with a maturity 
                   of three months or less to be cash equivalents.
-------------------------------------------------------------------------------
                                                                         F-7
<PAGE>


1. Summary of      Inventories
   Significant     Inventories are recorded at the lower of cost or market,  
   Accounting      cost being determined on a first-in, first-out (FIFO) 
   Policies        method.  Substantially, all items included in inventory
   Continued       at December 31, 1997 are finished goods.

                   Property and Equipment
                   Property and equipment are stated at cost less accumulated
                   depreciation.  Depreciation and amortization is determined
                   using the straight-line method over the estimated useful 
                   lives of the assets.  Expenditures for maintenance and 
                   repairs are expensed when incurred and betterments are 
                   capitalized.  Gains and losses on sale of property and 
                   equipment are reflected in operations.

                   Goodwill
                   Goodwill reflects the excess of the costs of purchasing
                   BioMeridian over the fair value of the related net assets at 
                   the date of acquisition, and is being amortized on the 
                   straight-line basis over 5 years.  At December 31, 1997, the 
                   accumulated amortization and amortization expense was 
                   $14,958.

                   Revenue Recognition
                   Revenue is recognized upon performance of services.  Revenue
                   from equipment sales is recognized when equipment has been
                   shipped and installed.

                   Income Taxes
                   Deferred income taxes are provided in amounts sufficient to
                   give effect to temporary differences between financial and 
                   tax reporting, principally related to depreciation.


                   Earnings Per Common and Common Equivalent Share
                   The computation of basic earnings per common share is 
                   computed using the weighted average number of common shares 
                   outstanding during the year.

                   The computation of diluted earnings per common share is based
                   on the weighted average number of shares outstanding during 
                   the year plus common stock equivalents which would arise from
                   the exercise of stock options and warrants outstanding using 
                   the treasury stock method and the average market price per 
                   share during the year.  Common stock equivalents are not 
                   included in the diluted earnings per share calculation when 
                   their effect is antidilutive.
-------------------------------------------------------------------------------
                                                                           F-8

<PAGE>

2. Going           The accompanying consolidated financial statements have been
   Concern         prepared assuming that the Company will continue as a going 
                   concern.  As of December 31, 1997, the Company had a deficit
                   in working capital of $3,136,800, and an accumulated deficit 
                   of$8,380,223 and incurred a loss of $2,997,392 for the year 
                   ended December 31,1997.  These conditions raise substantial 
                   doubt about the ability of the Company to continue as a 
                   going concern.  The consolidated financial statements do not 
                   include any adjustments that might result from the outcome 
                   of this uncertainty.

                   The Company's ability to continue as a going concern is 
                   subject to the attainment of profitable operations or 
                   obtaining necessary funding from outside sources.  
                   Management anticipates that sales of the helicopter cargo 
                   transport equipment and operations of BioMeridian will 
                   provide positive cash flow during 1998.  However, there can 
                   be no assurance they will be successful.


3. Property and    Property and equipment consists of the following:
   Equipment
                   Equipment                              $     246,944
                   Furniture and fixtures                       140,484
                   Leasehold improvements                         6,883
                                                          --------------
                                                                394,311

                   Accumulated depreciation and
                   amortization                                 (57,890)
                                                          ---------------
                                                           $    336,421
                                                          ---------------

4. Related         At December 31, 1997, the Company has unsecured notes payable
   Party Notes     due to shareholders and entities owned by a shareholder 
   Payable         totaling $750,000.  Each note has a stated interest rate of 
                   12% and is payable on demand.
-----------------------------------------------------------------------------
                                                                     F-9
<PAGE>
                                                 MAGELLAN TECHNOLOGY, INC.
                                  Notes to Consolidated Financial Statments
                                                                 Continued
------------------------------------------------------------------------------

5. Notes           At December 31, 1997, notes payable consist of various 
   Payable         revolving and non-revolving lines-of-credit.  The terms of 
                   those agreements are as follows:

                       Revolving line-of-credit which allows 
                       the Company to borrow up to $750,000 at 
                       an interest rate equal to the bank's 
                       prime rate plus 1.5% (10% at December 
                       31, 1997), due April 15, 1998, secured 
                       by the assets of SkyHook and guaranteed 
                       by certain shareholders.                   $   745,000

                       Revolving line-of-credit which allows 
                       the Company to borrow up to $750,000 at 
                       an interest rate equal to the bank's 
                       prime rate plus 1.0% (9.5% at December 31, 
                       1997), due July 20, 1998 and guaranteed 
                       by certain shareholders                        740,000

                       Non-revolving line-of-credit which allows 
                       the Company to borrow up to $1,200,000 at 
                       an interest rate equal to the bank's prime 
                       rate plus 1.0% (9.5% at December 31, 1997), 
                       due May 21, 1998 and guaranteed by certain 
                       shareholders                                   700,000

                       Revolving line-of-credit which allows the 
                       Company to borrow up to $25,050 at an 
                       interest rate equal to the bank's prime 
                       rate plus 2.0% (10.5% at December 31, 1997).  
                       The note is due June 14, 1998 and guaranteed 
                       by a shareholder                                25,022
                                                                     ----------
                                                                   $ 2,210,022

-------------------------------------------------------------------------------
                                                                          F-10

<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                               Notes to the Consolidated Financial Statements
                                                                   Continued
------------------------------------------------------------------------------
6. Long-term       Long-term debt is comprised of the following:
   Debt                Unsecured note payable to SIS, LLC, 
                       interest payable quarterly at the prime 
                       rate minus 1%, and commencing in October 
                       1998, principal payments of $9,722 due 
                       monthly until paid in full               $     350,000

                       Unsecured note payable to SIS, LLC, 
                       interest payable quarterly at the prime 
                       rate minus 1%, and commencing in October 
                       1998, principal payments of $4,167 due 
                       monthly until paid in full                     150,000

                       Note payable to a governmental entity due 
                       in monthly installments of $2,507, 
                       including interest at 8%, secured by the 
                       personal guarantees of certain shareholders, 
                       inventory, equipment and receivables            42,389

                       Unsecured, non-interest bearing notes 
                       payable to the former shareholders of 
                       BioMeridian, payable in monthly installments 
                       of $7,500                                       77,500

                       Unsecured note payable to and individual, 
                       payable in monthly installments of $2,000 
                       including interest at 10%                       19,615

                       Capital lease obligation (see note 7)          125,750
                                                                 -------------
                                                                      765,254
                       Less current portion                          (173,537)
                                                                 -------------
                                                                 $    591,717
                                                                 -------------



------------------------------------------------------------------------------
                                                                         F-11


<PAGE>

                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                   Continued
------------------------------------------------------------------------------

6. Long-term       Future maturities of long-term debt are as follows:
   Debt
   Continued             Year                                       Amount
                         -----                                      -------
                         1998                                   $   173,537
                         1999                                       204,917
                         2000                                       206,492
                         2001                                       152,616
                         2002                                        27,692
                                                                -------------
                                                                $   765,254
                                                                -------------

7. Capital         The Company leases certain equipment under a noncancellable 
   Lease           lease agreement.  The lease provides the Company the option 
   Obligation      to purchase the leased asset at the end of the initial lease 
                   term.  The asset under capital lease at December 31, 1997 is 
                   included in property and equipment as follows:

                   Equipment                                    $   125,750

                   Less accumulated amortization                        (99)
                                                                 ------------
                                                                $   125,651






                   Depreciation and amortization expense for the asset under 
                   capital lease for the period ended December 31, 1997 was $99.
                   The capital lease obligation has an imputed interest rate of 
                   9% and is payable in monthly installments through December 
                   2002.  Future maturities and minimum payments on capital 
                   lease obligations are as follows:

                   Amounts due                                   $  158,400
                   Less amount representing interest                (32,650)
                                                                 ------------
                   Present value of future minimum capital lease $  125,750
                                                                 ------------

------------------------------------------------------------------------------
                                                                        F-12

<PAGE>

                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                    Continued
------------------------------------------------------------------------------
     
8. Income          The benefit for income taxes is different than amounts which
   Taxes           would be provided by applying the statutory federal income 
                   tax rate to loss before benefit for income taxes for the 
                   following reasons:

                                                      Years Ended
                                                      December 31,
                                          -----------------------------------
                                               1997                1996
                                          -----------------------------------
          Federal income tax benefit
                at statutory rate          $ 1,019,000         $  993,000
          Meals and entertainment               (2,000)            (2,000)
          Change in valuation allowance     (1,017,000)          (991,000)
                                           ----------------------------------
                                           $        -          $       -
                                           ----------------------------------


          Deferred tax assets (liabilities) are comprised of the following:


          Net operating loss carryforwards                     $  2,179,000
          Subsidiaries stock basis                                  874,000
          Stock options and warrants                                 86,000
          Valuation allowance                                    (3,139,000)
                                                               -------------
                                                               $         -
                                                               -------------


          At December 31, 1997, the Company has a net operating loss 
          carryforwards available to offset future taxable income of
          approximately $6,400,000, which will begin to expire in 2008.  
          The utilization of the net operating loss carryforwards is dependent 
          upon the tax laws in effect at the time the net operating loss 
          carryforwards can beutilized.  The Tax Reform Act of 1986 
          significantly limits the annual amount that can be utilized for 
          certain of these carryforwards as a result of the change in 
          ownership.


------------------------------------------------------------------------------
                                                                          F-13

<PAGE>

                                                   MAGELLAN TECHNOLOGY, INC. 
                                   Notes to Consolidated Financial Statements
                                                                  Continued
------------------------------------------------------------------------------
     
     
9. Related         During 1997 and 1996, interest expense of approximately 
   Party           $30,068 and $8,675, respectively, was recognized on 
   Transactions    obligations due to shareholders of the Company.

                   Interest expense related to notes payable to SIS, LLC for 
                   the years ended December 31, 1997 and 1996 totaled $37,500 
                   and $8,889, respectively.

10. Supplemental   During 1997, the Company purchased all of the outstanding 
    Cash Flow      common stock of BioMeridian International, Inc. (formerly
    Information    BioSource, Inc.) in a purchase transaction.  The Company 
                   paid cash of $105,000 for the common stock and recorded net 
                   assets from the acquisition as follows:

                           Cash                                 $      2,110
                           Accounts receivable                        18,500
                           Inventory                                   8,000
                           Property and equipment, net                 9,188
                           Intangibles                               358,997
                           Accounts payable                          (57,955)
                           Accrued expenses                          (14,132)
                           Long-term debt                            (26,436)
                           Notes payable                             (25,022)
                                                                --------------
                                                                     273,250


                           Less amount financed with long-term debt  (85,000)
                           Less common stock issued                  (83,250)
                           Less cash received                         (2,110)
                                                                --------------
                                      Net cash paid             $    102,890
                                                                --------------
------------------------------------------------------------------------------
                                                                         F-14

<PAGE>


10. Supplemental   During the year ended December 31, 1996: 
    Cash Flow               
    Information       On August 1, 1996, the Company transferred all of its 
    Continued         assets and liabilities in exchange for a 49% interest in 
                      SIS,LLC.  The net assets transferred consisted of the 
                      following:

                      Accounts receivable                      $    260,848
                      Other current assets                          148,306
                      Property and equipment, net                   506,252
                      Other assets                                  179,586
                      Accounts payable                              (91,000)
                      Accrued expenses                              (86,322)
                      Debt                                         (760,331)
                                                               --------------

                        Net assets purchased                        157,339

                        Less investment in joint venture           (174,973)
                                                               --------------
                        Net cash investment                    $    (17,634)
                                                               --------------




                   The Company increased the investment in joint venture and
                   increased additional paid-in capital of $1,380,764 in 
                   accordance with the provisions of SEC Staff Accounting 
                   Bulletin 51 (see note 1).


                      During 1996, the Company purchased 646,667 shares of 
                      SkyHook common stock for $635,000 cash.  On October 15, 
                      1996,the Company acquired the balance of the outstanding 
                      shares of SkyHook in a purchase transaction.  The Company 
                      issued 4,874,936 shares of its common stock and $335,000 
                      cash for SkyHook common stock.  The net assets acquired 
                      are as follows:

                      Prepaid expenses                         $      96,873
                      Property and equipment, net                     67,836
                      Accounts payable                               (23,265)
                      Accrued expenses                               (82,579)
                      Long-term debt                                 (85,000)
                      Common stock                                  (216,612)
                                                                --------------
                      Net cash received                        $     242,747
                                                                --------------
------------------------------------------------------------------------------
                                                                         F-15

<PAGE>

                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                   Continued
------------------------------------------------------------------------------

10. Supplemental   The Company reduced accounts payable in the amount of $32,945
    Cash Flow      in exchange for the issuance of 164,727 shares of common 
    Information    stock.
    Continued      Actual amounts paid for:


                                                         Years Ended
                                                         December 31,
                                                ----------------------------
                                                    1997             1996
                                                ----------------------------

                   Interest                     $  161,843       $  47,644
                                                ----------------------------
                   Income taxes                 $        -       $       -
                                                ----------------------------


------------------------------------------------------------------------------
                                                                         F-16


<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                  Continued
------------------------------------------------------------------------------

11. Stock Options  The Company has an incentive stock option plan wherein 
    and Warrants   2,500,000 shares of the Company's common stock can be 
                   issued.  The Company has granted stock options to certain 
                   officers and shareholders of the Company to purchase shares 
                   of the Company's restricted common stock.  In addition, the 
                   Company granted warrants to related parties.  Generally 
                   stock options issued to employees are subject to vesting
                   provisions for several years.  Upon issuance of stock 
                   options/warrants, unearned compensation equivalent to the 
                   difference between the option/warrant exercise price and the
                   market value at the date of grant is charged to stockholders'
                   equity and subsequently amortized over the period during 
                   which the option/warrant vests.  Amortization of $252,000
                   was recorded in 1997.  A schedule of the options and warrants
                   at December 31, 1997 is as follows:

                                  Number of
                         --------------------------            Price Per
                          Options        Warrants                Share
                       -------------------------------------------------------
    Outstanding at
    January 1, 1996      413,598          233,342          $   .20 to 1.20
    Granted              597,000                -              .30 to .37
    Exercised                  -                -                       -
    Expired             (106,262)               -                     .37
                       -------------------------------------------------------

Outstanding at
December 31, 1996        904,336          233,342               .20 to 1.20
Granted                1,159,000          412,500               .37 to 1.00
Exercised                (26,667)               -                       .37
Forfeited                (13,333)               -                       .37
                        ------------------------------------------------------
Outstanding at
December 31, 1997      2,023,336          645,842           $   .20 to 1.20
                       -------------------------------------------------------
------------------------------------------------------------------------------
                                                                         F-17

<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                 Continued
------------------------------------------------------------------------------
12. Stock-Based    The Financial Accounting Standards Board has issued 
    Compensation   Compensation   Statement of Financial Accounting Standards 
                   No. 123, "Accounting for Stock-Based Compensation" (SFAS 123)
                   which established financial accounting and reporting 
                   standards for stock-based compensation.  The new standard 
                   defines a fair value method of accounting for an employee 
                   stock option or similar equity instrument.  This statement 
                   gives entities the choice between adopting the fair value 
                   method or continuing to use the intrinsic value method under 
                   Accounting Principles Board (APB) Opinion No. 25 with 
                   footnote disclosures of the pro forma effects if the fair 
                   value method had been adopted.  The Company has opted for 
                   the latter approach.  Accordingly, compensation expense has 
                   been recognized for the stock option plans based on the 
                   intrinsic value method.  Had compensation expense for the 
                   Company's stock option plan been determined based on the fair
                   value at the grant date for awards in 1997 and 1996, 
                   consistent with the provisions of SFAS No. 123, the 
                   Company's results of operations would have been reduced to 
                   the pro forma amounts indicated below:

                                                          Years Ended
                                                          December 31,
                                                 ----------------------------
                                                    1997                1996
                                                 ----------------------------

                   Net loss - as reported        $  2,997,392   $  (3,216,787)
                   Net loss - pro forma          $ (4,166,227)  $  (3,229,683)
                   Loss per share - as reported  $       (.22)  $        (.33)
                   Loss per share - pro forma    $       (.30)  $        (.33)
                                                 -----------------------------

                   The fair value of each option grant is estimated in the date 
                   of grant using the Black-Scholes option pricing model with 
                   the following assumptions:


                                                          December 31,
                                                   ---------------------------
                                                    1997               1996
                                                   ---------------------------

                   Expected dividend yield         $        -    $          -
                   Expected stock price volatility        203%            280%
                   Risk-free interest rate                5.5%            5.5%
                   Expected life of options         5 to 10 years  2 to 5 years
                                                    --------------------------

                   The weighted average fair value of options granted during 
                   1997 and 1996 are $1.55 and $.36, respectively.
------------------------------------------------------------------------------
                                                                          F-18
<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.  
                                   Notes to Consolidated Financial Statements
                                                                  Continued
------------------------------------------------------------------------------
12. Stock-Based    The following table summarizes information about stock 
    Compensation   options and warrants  outstanding at December 31, 1997:
    Continued


                           Outstanding                   Exercisable
          --------------------------------------------------------------------
                                   Weighted
                                   Average
                    Number         Remaining    Weighted     Number    Wieghted
     Range of      Outstanding    Contractual    Average   Exercisable  Average
     Exercise         at             Life       Exercise       at      Exercise
     Prices        12/31/97         (Years)      Price      12/31/97     Price
    --------------------------------------------------------------------------
    $.20 to.37    $2,345,844         4.4         $0.35     1,192,010     $0.34
           .60        33,334         2.4          0.60        13,334      0.60
  1.00 to 1.20       290,000         6.8          1.00         8,000      1.05
    ---------------------------------------------------------------------------
    $.20 to 1.20   2,669,178         4.6         $0.42     1,213,344     $0.35



13. Earnings Per   In February 1997, the Financial Accounting Standards Board 
    Share          issued Statement of Financial Accounting Standards No. 128 
                   (SFAS128) "Earnings Per Share," which requires companies to 
                   present basic earnings per share (EPS) and diluted earnings 
                   per share,instead of the primary and fully diluted EPS as 
                   previously required.  The new standard also requires 
                   additional informational disclosures, and makes certain
                   modifications to the previously applicable EPS calculations
                   defined in Accounting Principles Board No. 15.  The new 
                   standard is required to be adopted by all public companies 
                   for reporting periods ending after December 15, 1997, and 
                   requires restatement of EPS for all prior periods
                   reported.  During the year ended December 31, 1997, the
                   Company adopted this standard.

-------------------------------------------------------------------------------
                                                                           F-19

<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                  Continued
-------------------------------------------------------------------------------

13. Earnings Per   Earnings per share information is as follows:
    Share
    Continued                                           Years Ended
                                                        December 31,
                                               -------------------------------
                                                    1997            1996
                                               -------------------------------

        Net loss available to common
        stockholders                           $ (2,997,392)    $ (2,921,379)
                                               -------------------------------
        Average equivalent shares
        (basic and diluted)                    $ 13,685,000     $  8,984,000

        Net loss per share                     -------------------------------
        (basic and diluted)                    $      (.22)     $      (.33)
                                               -------------------------------


14. Significant    Summarized financial information for SIS, LLC, a significant
    Unconsolidated unconsolidated affiliate of the Company, is as follows:
    Affiliate

                                                         December 31
                                               --------------------------------
        Year-end financial position:                 1997           1996
                                               --------------------------------
        Current assets                         $  1,166,600       $  1,898,399
        Noncurrent assets                      $  1,954,725       $  1,274,959
        Current liabilities                    $    225,508       $    118,128
        Noncurrent liabilities                 $     46,296       $     57,407

        Results of operations:
                                                                    Period
                                                    Year           August 1
                                                    Ended           1996 to
                                                 December 31,     December 31,
                                                    1997             1996
                                                -------------------------------
                        Sales                   $  4,015,220      $  990,049
                        Net loss                $   (148,302)     $ (177,150)

-------------------------------------------------------------------------------
                                                                          F-20

<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                 Continued
-------------------------------------------------------------------------------

15. Business       The Company operates in three business segments:  
    Segments       1) Image-based data entry services, 2) Medical device 
                   manufacture and distribution , 3) Helicopter cargo management
                   systems manufacture and distribution.

                   The following tables present financial information by 
                   business segment for the years ended December 31, 1997 and 
                   1996.  Subsequent to October 15, 1996, the operations of 
                   SIS, LLC have been accounting for using the equity method 
                   of accounting.


                                            Helicopter
                   Image-                     Cargo
                Based Data                   Manage-     Corporate
                   Entry        Medical       ment       and Elimi-   Consoli
  1997           Services       Devices      Systems      nations      dated
-------------------------------------------------------------------------------
Sales to 
unaffiliated
customers      $     -        $ 319,611    $     -      $      -   $   319,611
Operating loss       -          (89,501)    (2,254,339)  (409,879)  (2,753,719)
Equity in loss 
of joint venture (68,960)             -          -              -      (68,960)
Identifiable 
assets               -          119,796        900,882   1,667,019   2,687,697
Capital 
expenditures         -           49,958        238,199          -      288,157
Depreciation         -            4,709         21,822      14,958      41,489

                                            Helicopter
                   Image-                     Cargo
                Based Data                   Manage-     Corporate
                   Entry        Medical       ment       and Elimi-   Consoli
  1997           Services       Devices      Systems      nations      dated
-------------------------------------------------------------------------------
Sales to 
unaffiliated
customers     $ 1,150,046     $       -   $       -    $       -    $ 1,150,046
Operating 
loss               49,065             -      (225,404)   (2,606,165) (2,782,504)
Equity in 
loss of 
joint venture     (86,804)            -           -            -        (86,804)
Identifiable 
assets          1,468,933             -       141,278        19,141   1,629,352
Capital 
expenditures      138,735             -        71,842          -        210,577
Depreciation       97,611             -         6,685          -        104,296

------------------------------------------------------------------------------
                                                                       F-21
<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial statements
                                                                  Continued
-------------------------------------------------------------------------------

16. Fair Value of  None of the Company's debt instruments are held for trading
    Financial      purposes. The Company estimates that the fair value of all 
    Instruments    financial instruments at December 31, 1997, does not differ 
                   materially from the aggregate carrying values of its 
                   financial instruments recorded in the accompanying balance 
                   sheet.  The estimated fair value amounts have been determined
                   by the Company using available market information and 
                   appropriate valuation methodologies.  Considerable judgement 
                   is necessarily required in the interpreting market data to 
                   develop the estimates of fair value, and, accordingly, the 
                   estimates are not necessarily indicative of the amounts that 
                   the Company could realize in a current market exchange.

17. Commitments    Operating Leases
                   The Company is obligated under certain non-cancelable 
                   operating leases for rental of office and manufacturing 
                   space.  Total lease expense for the years ended December 31, 
                   1997 and 1996 was approximately $58,000 and $99,000, 
                   respectively.  Future minimum lease payments under 
                   noncancellable operating leases with initial terms of one
                   year or more are as follows at December 31,  1997:


                   Years Ended December 31,                     Amount
                   ------------------------                ---------------

                           1998                             $   172,776
                           1999                                 143,270
                           2000                                  61,531
                                                           ----------------
                                                            $   377,577
                                                           ----------------






18. Pro Forma      The following condensed pro forma combined statements of
    Condensed      operations for the years ended December 31, 1997 and 1996 
    Combined       for Magellan and BioMeridian assumes the acquisition of 
    Statement of   BioMeridian by Magellan as of the beginning of the years 
    Operations     then ended.
-------------------------------------------------------------------------------
                                                                           F-22
<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to Consolidated Financial Statements
                                                                  Continued
-------------------------------------------------------------------------------

18. Pro Forma      The pro forma results of operations are not necessarily 
    Condensed      indicative of the results of operations that would actually 
    Combined       have been obtained if the transactions had occurred as of 
    Statement of   the beginning of the years then ended. These statements 
    Operations     should be read in conjunction with the historical financial 
    Continued      statements and related notes.

                   Pro forma information for the year ended December 31, 1997 
                   is as follows:

                   Magellan        BioMeridian
                  Technology      International
                     Inc.              Inc.      Total   Adjustments  Combined
                  -------------------------------------------------------------
Net sales       $     -         $  1,006,762   $1,006,762  $    -   $ 1,006,762
Costs and 
expenses         (1,798,680)        (819,323)  (2,618,003)      -    (2,618,003)
                  -------------------------------------------------------------
Net (loss) 
income          $(1,798,680)    $    187,439   $(1,611,241) $   -   $(1,611,241)
                 --------------------------------------------------------------
Net loss per 
share                  (.13)                                               (.12)
                 -------------                                       -----------
Weighted average
number of common
shares 
outstanding       13,638,000                                          13,863,000
                 -------------                                       -----------

                   Pro forma information for the year ended December 31, 1996 
                   is as follows:

                   Magellan        BioMeridian
                  Technology      International
                     Inc.              Inc.      Total   Adjustments  Combined
                  -------------------------------------------------------------
Net sales       $  1,150,046     $   947,798   $2,097,844  $    -   $ 2,097,844
Costs and 
expenses         (4,071,425)        (679,138)  (4,750,563)      -    (4,750,563)
                  -------------------------------------------------------------
Net (loss) 
income          $(2,921,379)    $    268,660   $(2,652,719) $   -   $(2,652,719)
                 --------------------------------------------------------------
Net loss per 
share                  (.33)                                               (.29)
                 -------------                                       -----------
Weighted average
number of common
shares 
outstanding        8,984,000                                          9,209,047
                 -------------                                       -----------
-------------------------------------------------------------------------------
                                                                        F-23
<PAGE>
                                                   MAGELLAN TECHNOLOGY, INC.
                                   Notes to consolidated Financial Statements
                                                                  Continued
-------------------------------------------------------------------------------

19. Subsequent     Effective February 27, 1998, the related party notes payable 
    Events         (see note 4), in the amount of $750,000, were converted to 
                   common stock of the ompany.  In addition, the interest 
                   payable of approximately $44,000 was used by the shareholders
                   to exercise warrants to purchase common stock.


                   In addition, a shareholder loaned $400,000 to the Company
                   subsequent to the year ended December 31, 1997.  And 
                   effective February 27, 1998, the shareholder converted 
                   these notes payable to common stock.  The interest payable 
                   of approximately $2,500 was used by the shareholder
                   to exercise warrants to purchase common stock.


------------------------------------------------------------------------------
                                                                        F-24
<PAGE>